You’ve probably used a freemium product today. Maybe you listened to a free music streaming service with ads, played a mobile game with in-app purchases, or used a project management tool with a basic free plan. The model is everywhere.

This business strategy hinges on a simple idea: attract a large number of users with a free, functional product. The hope is that a small fraction of these users will love the product enough to pay for more features, better service, or an ad-free experience. The free users aren't a loss; they help spread the word and create a potential customer base for the future.

While the term "freemium" is a product of the digital age, the concept isn't entirely new. Think of the old shareware model from the 1980s and 90s, where software was distributed for free, encouraging users to pay for a full, unrestricted version. The term itself was coined in 2006 by venture capitalist Fred Wilson, who was describing a model he saw succeeding online.

The rise of the internet and the near-zero cost of distributing digital products made this model explode. Suddenly, companies could offer a service to millions of people for very little marginal cost, making it viable to support a massive free user base with revenue from a small percentage of paying customers.

The freemium model is incredibly flexible and has been adapted by a wide range of industries. It's not just for software anymore. Here are a few common examples of how different sectors use it.

In each case, the free version provides real value, acting as both a product and a marketing tool. It lets people experience the core service without any upfront commitment, lowering the barrier to entry and building a wide funnel of potential customers.